Overshadowing all global and regional issues is the euro zone's sovereign-debt crisis.
Global growth prospects are being hindered by the lack of resolution of this issue, and financial markets the world over are reflecting the increase in anxiety and in risk-aversion.
Somewhat surprisingly, the GCC appears to be bucking some of these trends, with regional growth prospects for this year looking quite good and consensus forecasts at the start of the year likely to be subject to upward revisions.
A further deterioration in the euro zone, with a possible break-up of the single currency, would be much harder to ignore, however, as it could have consequences for the region through a series of linkages. In particular, the Gulf could be affected through trade flows, financial market linkages as well as through the broader impact on global activity, which in turn could hurt regional sentiment.
Of these, the financial linkages are perhaps the most worrisome, as their consequences could be among the most severe, but the precise connections remain difficult to identify and to quantify.
The Lehman-triggered banking crisis of 2008 certainly taught us that these connections should not be underestimated, however. The risk to the GCC may be less about direct linkages and more about indirect ones.
GCC exposure to the euro zone is quite small, while euro-zone financial institutions are already reducing their assets to meet new capital requirements, a process that would likely accelerate if the sovereign-debt crisis worsened.
Most of this deleveraging will probably take place through reducing domestic assets, but foreign assets will not be immune, especially foreign assets that are not considered central to an institution's core activities.
While most of the European exposure to the region comes from British banks rather than from euro-zone ones directly, it is likely that the United Kingdom's banking system would also undergo significant deleveraging in coming years as it is itself heavily exposed to the euro zone.
The withdrawal of European banks from the region would also leave local institutions having to pick up the credit not renewed by European entities, which could in turn crowd out the credit available for new businesses.
In fact a structural shock to the euro zone, and to its financial system, could lead to a continuing drying up of available credit to the GCC from European banks and financial institutions as they enter a period of substantial deleveraging that could last for a number of years.
Furthermore, as we saw during the Lehman crisis, as liquidity in global markets dries up, access to funding by regional financial institutions is likely to become more challenging.
Although regional banks are probably less dependent on foreign-bank borrowing than they were immediately after the global banking crisis began, the likely freezing up of the interbank market could lead some regional banks to have to seek funding elsewhere, or at least to pay a premium to receive it.
Credit default swap spreads would almost certainly rise in unison, at least until the markets gain a clear picture of the genuine credit market landscape.
The transmission of the economic downturn in the euro zone into to the Gulf would come primarily through trade flows.
Again, on the surface, the direct impact of these may actually be quite limited, as the euro zone accounts for a relatively small share of the region's trade flows. For instance, for the UAE, which is the most open economy in the region, the euro zone accounted for just 10 per cent of trade values last year and less than 6 per cent of trade volumes.
For the region as whole, the picture is broadly similar, and represents a sizeable decline in Europe's importance as a trade partner from 30 years ago, when the figure was closer to 30 per cent.
However, it is in the realm of indirect linkages where the euro-zone crisis could again bite.
India and China have risen in importance as regional trade partners in recent years, with the Asia-Pacific region collectively accounting for about half of the UAE's trade values last year.
Clearly, the deepening sovereign-debt crisis in Europe would impair the growth of these countries as well, which would potentially dampen demand for the region's exports to these key markets.
To the extent that the US dollar strengthens further as well, driven by haven flows and risk aversion, this would further hinder GCC exports around the world, while making regional imports cheaper, which could at least cause inflation to fall.
As we can see, in terms of the two major transmission mechanisms by which a euro-zone crisis could affect the Gulf, financial and economic, it is the indirect consequences that are potentially the most worrying, leaving the exact impact harder to quantify and to measure.
It is precisely because of this that the euro zone represents the biggest challenge to the region, in common with the threat it poses to the rest of the world.
Tim Fox is the group head of research and the chief economist at Emirates NBD. He writes here in a personal capacity
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Some facts about bees:
The queen bee eats only royal jelly, an extraordinary food created by worker bees so she lives much longer
The life cycle of a worker bee is from 40-60 days
A queen bee lives for 3-5 years
This allows her to lay millions of eggs and allows the continuity of the bee colony
About 20,000 honey bees and one queen populate each hive
Honey is packed with vital vitamins, minerals, enzymes, water and anti-oxidants.
Apart from honey, five other products are royal jelly, the special food bees feed their queen
Pollen is their protein source, a super food that is nutritious, rich in amino acids
Beewax is used to construct the combs. Due to its anti-fungal, anti-bacterial elements, it is used in skin treatments
Propolis, a resin-like material produced by bees is used to make hives. It has natural antibiotic qualities so works to sterilize hive, protects from disease, keeps their home free from germs. Also used to treat sores, infection, warts
Bee venom is used by bees to protect themselves. Has anti-inflammatory properties, sometimes used to relieve conditions such as rheumatoid arthritis, nerve and muscle pain
Honey, royal jelly, pollen have health enhancing qualities
The other three products are used for therapeutic purposes
Is beekeeping dangerous?
As long as you deal with bees gently, you will be safe, says Mohammed Al Najeh, who has worked with bees since he was a boy.
“The biggest mistake people make is they panic when they see a bee. They are small but smart creatures. If you move your hand quickly to hit the bees, this is an aggressive action and bees will defend themselves. They can sense the adrenalin in our body. But if we are calm, they are move away.”
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The burning issue
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Read part four: an affection for classic cars lives on
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• Number of active reserves should be increased by 20%
• More F-35 fighter jets required in the next decade
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Company name: baraka
Started: July 2020
Founders: Feras Jalbout and Kunal Taneja
Based: Dubai and Bahrain
Sector: FinTech
Initial investment: $150,000
Current staff: 12
Stage: Pre-seed capital raising of $1 million
Investors: Class 5 Global, FJ Labs, IMO Ventures, The Community Fund, VentureSouq, Fox Ventures, Dr Abdulla Elyas (private investment)
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Awar Qalb
Director: Jamal Salem
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MATCH INFO
Bayern Munich 2 Borussia Monchengladbach 1
Bayern: Zirkzee (26'), Goretzka (86')
Gladbach: Pavard (37' og)
Man of the Match: Breel Embolo (Borussia Monchengladbach)
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Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
PULITZER PRIZE 2020 WINNERS
JOURNALISM
Public Service
Anchorage Daily News in collaboration with ProPublica
Breaking News Reporting
Staff of The Courier-Journal, Louisville, Ky.
Investigative Reporting
Brian M. Rosenthal of The New York Times
Explanatory Reporting
Staff of The Washington Post
Local Reporting
Staff of The Baltimore Sun
National Reporting
T. Christian Miller, Megan Rose and Robert Faturechi of ProPublica
and
Dominic Gates, Steve Miletich, Mike Baker and Lewis Kamb of The Seattle Times
International Reporting
Staff of The New York Times
Feature Writing
Ben Taub of The New Yorker
Commentary
Nikole Hannah-Jones of The New York Times
Criticism
Christopher Knight of the Los Angeles Times
Editorial Writing
Jeffery Gerritt of the Palestine (Tx.) Herald-Press
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Barry Blitt, contributor, The New Yorker
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Fiction
"The Nickel Boys" by Colson Whitehead (Doubleday)
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Torque: 790Nm from 2,000-3,600rpm
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Fuel consumption: 11.7L/100km
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Engine: 2.0-litre 4-cylturbo
Transmission: seven-speed DSG automatic
Power: 242bhp
Torque: 370Nm
Price: Dh136,814
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Analysis
Maros Sefcovic is juggling multiple international trade agreement files, but his message was clear when he spoke to The National on Wednesday.
The EU-UAE bilateral trade deal will be finalised soon, he said. It is in everyone’s interests to do so. Both sides want to move quickly and are in alignment. He said the UAE is a very important partner for the EU. It’s full speed ahead - and with some lofty ambitions - on the road to a free trade agreement.
We also talked about US-EU tariffs. He answered that both sides need to talk more and more often, but he is prepared to defend Europe's position and said diplomacy should be a guiding principle through the current moment.
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